China Business And Regulation. The Times They Are A Changing.

The Asia Business Media Blog just did a post, entitled, “China’s attitude shift,” on a James McGregor talk Woodward attended today in Hong Kong.
McGregor, a “journalist, media entrepreneur, investor and long-time resident of China gave a sobering talk” on how China is beginning to treat foreign businesses in its midst:

McGregor says that he loves both countries, but he thinks there has been an unsettling attitude shift in China recently. He believes that the arrogance that was once a less-than-appealing feature of U.S. businesses abroad has been adopted by the Chinese at an alarming rate.
Some of McGregor’s other observations included:
– A belief in “exceptionalism,” which was once an American position, is now common amongst Chinese business leaders and officials.
– More than ever before, Chinese authorities are moving to implement regulations to rig markets in favour of Chinese businesses. These regulations are designed to replace foreign businesses.
– “Indigenous Innovation” is a policy gaining traction at all levels of government in China. McGregor notes however, encouraging innovation which is protected from global competition by a net of regulations is not a plan that is likely to succeed.
– State-owned enterprises are enjoying a resurgence as Beijing has rediscovered its interest in maintaining an economic constituency that it can count on and control. Privately-owned Chinese businesses are beginning to feel they are at a disadvantage in their own country.

With China being hailed as the world economy’s savior, its government has concludedthis is its century. The West is irrelevant and China will lead a vanguard of new players — and the game will be played by Beijing’s rules. Particularly in the area of trade and investment, China hopes to jettison the constraints of world trade law for a return to the policy of national interest and raw power. In this new world order, Beijing sees little need for foreign economic or technical assistance.
From the standpoint of foreign investors in China, this new self-image is already having a significant impact:
• Applications for wholly foreign owned enterprises (WFOEs) and joint ventures are more often being delayed or denied by demands for documents or capitalization not required by law. Officials openly state they are no longer interested in encouraging foreign investment.
• Registration of technology licenses is either prohibited or restricted in direct violation of law. The idea is that Chinese business should no longer be required to pay for access to foreign technology.
• Visas for foreign workers are increasingly being delayed, denied or restricted. The position is that Chinese workers are available to do any job.
• Investments in China used to be falsely profitable as foreigners qualified for tax breaks unavailable to domestic businesses while employment and wage rules were not enforced. This position has completely reversed. Chinese and foreign companies are expected to operate under exactly the same rules, making many foreign ventures unprofitable.

As China lawyers, we have certainly been “feeling it” and though I will not get into specifics, I can say that in the last few months we have encountered a number of instances where we have filed applications/registrations 100% pursuant to law and in the very same way we have successfully done over the last few years and some Chinese government officials are telling us to do more. And when we point out that we have already done everything required, we are told that doesn’t matter. We have yet to be denied anything in the end, but there is absolutely no doubt that the legal hoops foreign companies are being required to jump through in China have, in many instances, been raised.
Are you seeing the same thing?

I am a founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, China and Spain.

I mostly represent companies doing business in emerging market countries. It has taken me many years to build my network and it takes constant communication and travel to maintain it. My work has been as varied as securing the release of two improperly held helicopters in Papua New Guinea, setting up a legal framework to move slag from Canada to Poland’s interior, overseeing hundreds of litigation and arbitration matters in Korea, helping someone avoid terrorism charges in Japan, and seizing fish product in China to collect on a debt.

I was named as one of only three Washington State Amazing Lawyers in International Law, I am AV rated by Martindale-Hubbell Law Directory (its highest rating), I am rated 10.0 by AVVO.com (its highest rating), and I am a SuperLawyer.

I am a frequent writer and public speaker on doing business in Asia and I constantly travel between the United States and Asia. I most commonly speak on China law issues and I am the lead writer of the award winning China Law Blog (www.chinalawblog.com). Forbes Magazine, Fortune Magazine, the Wall Street Journal, Investors Business Daily, Business Week, The National Law Journal, The Washington Post, The ABA Journal, The Economist, Newsweek, NPR, The New York Times and Inside Counsel have all interviewed me regarding various aspects of my international law practice.

About China Law Blog

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.